Three Years Ago, Sharon Loaned Her Sister $30,000 to Buy

question 44

Multiple Choice

Three years ago, Sharon loaned her sister $30,000 to buy a car. A note was issued for the loan with the provision for monthly payments of principal and interest. Last year, Sharon purchased a car from the same dealer, Hank's Auto. As partial payment for the car, the dealer accepted the note from Sharon's sister. At the time Sharon purchased the car, the note had a balance of $18,000. During the current year, Sharon's sister died. Hank's Auto was notified that no further payments on the note would be received. At the time of the notification, the note had a balance due of $15,500. What is the amount of loss, with respect to the note, that Hank's Auto may claim on the current year tax return?

• A) $0
• B) $3,000
• C) $15,500
• D) $18,000
• E) None of the above

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Definitions:

Power Circuit

The part of an electrical system that distributes power to various components or devices, capable of handling high currents.

Contactor Unit

An electrical device designed to switch an electrical power circuit on or off, typically used for controlling large loads in industrial applications.

Overload Unit

An overload unit is a protective device used in electric circuits to prevent motors and other electrical devices from operating at excessive current levels that could cause damage or overheating.

Manual Motor Starter

A manually operated switch designed to start and stop motors while providing overload protection.